It seems to me that anybody who argues against Thomas Piketty’s views of capital and income inequality will inevitably be dismissed as opposing a tax on wealth for self-serving reasons.
It seems to me that anybody who argues against Thomas Piketty’s views of capital and income inequality will inevitably be dismissed as opposing a tax on wealth for self-serving reasons.
So many holes in this guy’s argument. Just as an example, he notes that not many on the Forbes list in 1987 are there in 2013. Well, yes, old people die. 26 years from now most of the people on the list worn be there either. Buffett is 83 and the Koch brothers are both about 80. It would put Gates at 84 and there is certainly no guarantee he makes it that far (see Jobs, Steve). And, of course returns have been going disproportionately to capital. Heck, Drew notes it all of the time.
I think the problem is that capitalism is still relatively new. It certainly looks like it has a tendency to accumulate wealth into the hands of very few people. It also looks as though it has the ability to kind of auto-correct, albeit through major catastrophes. I don’t think anyone really knows what it becomes in the long term if wars and depressions can be avoided.
Steve
Holes is putting it mildly. Is claim 1 even challenged?
The problem is fiat money and fractional reserve lending. Money is created through lending, and credit creates more credit. Hence, the money supply is dwarfed by the credit supply. Those who are able to create credit will be able to amass wealth at a compounding rate.
There may be some scheme to tax the wealth created through credit creation, but credit creation is what causes the economy to expand more rapidly. This provides the government funding for the programs to ease the problems caused by the credit creation.
The credit creators will never be taxed at these rates because they are have gotten wealthy by amassing power. The taxes will be levied on those below, and they will carve out special exemptions for their extraordinary contributions.
If you understand the world through the textbooks, economics professors, Wikipedia, and Fed Chairmen, this seems like the ravings of a crazy old man, and the last 6 years have just been a bad dream. Maybe, you will wake up soon, and everything will be all right.
Maybe not. Hopefully, you do not find a Boojum.
Drew has noted no such thing. But Steve’s comment does indicate that he has been unable to understand the issues and follow the argument.
Drew has noted that capital can move extremely quickly if returns do not warrant it’s current employment. That’s a separate concept.
As for increasing returns to capital, that is demonstrably false over any sensible time period. Over the past 25, 50 or 75 years has the 3 yr T-bill rate risen? Does a bank working capital loan cost 15% today vs 6-7% historically? (No). I haven’t looked at Ibbotson data or the CRSP tapes in ages, but I bet public equities still return about 10-11%. Private equity returns are actually down structurally ( not cyclically). How about large capital equipment manufacturing- does it return EBITDA margins of 15-20-25% today vs 10% yesterday? No. It appears competition is alive and well.
Share of income has been discussed here rather recently. The St. Louis fed covered 1950 to 2010 and labors share of income moves nary off of 70% over the period. The mistake very one makes is that they cannot understand that you have to look past just wages to include product prices to understand who benefits from capital investment. Workers are also purchasers, and at the end of the day the estimated benefit of investment is about 95% to labor. Think Wal-Mart, consumer electronics, computing power or the internet.
Someday those who buy into Piketty will be viewed as doing so for purely ideological reasons.